Vacancy will create SEC question mark

As Houstonian leaves the panel, partisan approach could emerge

CARRIE JOHNSON, Washington Post

Published 5:30 am, Friday, September 14, 2007

WASHINGTON — The senior Democrat at the Securities and Exchange Commission is to step aside Tuesday, leaving the nation's top stock market watchdog without a full complement of five commissioners for the first time since a wave of scandals began to devastate investor confidence in 2002.

The departure of Roel Campos, a former Houston radio executive, would leave three Republicans and one Democrat on the panel, raising questions about the fate of corporate-enforcement efforts and divisive rule proposals.

The practical impact of the exit is far from certain, however. SEC Chairman Christopher Cox, a former GOP lawmaker, often has sided with Democrats as he strove to pass rules and crack down on questionable business practices. And whenever possible, he has made a point of seeking consensus, resulting in a series of unanimous votes.

The question now, agency insiders say, is whether Cox will continue to steer a moderate course that at times could result in gridlock or whether the SEC instead might succumb to partisan discord.

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"This may well be a very tough time for the commission in terms of its ability to make decisions when you have the kind of 2-to-2 split that seems to be emerging," said Meyer Eisenberg, a retired SEC deputy general counsel.

Cox succeeded in tamping down dissent, at least publicly, by accommodating concerns from the panel's sometimes warring factions. But on a small number of the most critical issues before the SEC, including whether and how much to fine errant businesses and give investors more power to select corporate board members, unanimity was difficult at best.

For example, Atkins and Casey openly criticized fining companies in ways that they say penalize current shareholders. An SEC pilot program launched this year gives the five commissioners more control over the process, requiring enforcement staff members to get their approval before beginning settlement talks with companies.

The Republicans also voted against issuing a proposal that would give investors greater say in naming corporate directors. Instead they pressed Cox to give a separate, conflicting plan.

To give both sides their say, Cox voted this summer to support each of the competing plans. The SEC is tentatively scheduled to revisit the subject in November.

The five SEC commissioners presented a joint statement at a June hearing of the House Financial Services Committee asserting the importance of a clear and consistent approach.

Lawmakers may hold the agency to that promise. Labor unions have been urging Democratic legislators to send a message that pushing through divisive policies while the commission is short on Democrats would not be met with favor in Congress.